Sin Taxes Should at Least Reflect Risk

The Food and Drug Administration is moving at a snail's pace when it comes to exercising its relatively new authority to regulate tobacco products. But playing out right now in statehouses around the country is a different form of tobacco regulation; and it is happening at
lighting-fast pace.

Regarding federal FDA regulation, the lack of any major moves is, in many ways,a good thing. It indicates that the agency's leaders understand the complexity of the issue, the need to evaluate the science and the risk of unintended consequences of knee-jerk regulations.

But there's also a downside to how slowly the agency is acting. Uncertainty impedes innovation of lower-risk products that will, sooner or later, be regulated. These tobacco harm reduction products include E-cigarettes and non-combustible tobacco products such as smokeless tobacco (snus).

Smokers in the U.S. and around the world are increasingly using these less harmful products to quit smoking. These products offer nicotine, the addictive but not particularly harmful
component of cigarettes, without the harmful smoke. Clear regulatory guidance, including speedy approval of modified risk claims can benefit public health in ways that hundreds of millions of dollars of government funded anti-tobacco campaigns have been unable to do.

But the states aren't waiting for FDA to make the first moves. While FDA regulation preempts most state-level tobacco regulation, state governments still regularly try to influence behavior. The most prominent way they do this is in the form of sin taxes, a type of excise tax intended to discourage the purchase of disfavored products.

Sin taxes are a bad idea for many reasons. A new report by the Competitive Enterprise Institute, based on the work of the Adam Smith Institute's Christopher Snowdon provides an up-to-date explanation of
the folly of sin taxes.

Nonetheless, if price is meant to influence behavior, then it is vexing that some states have tax structures that would encourage the most harmful form of tobacco use, cigarette smoking, by taxing them at a lower rate than lower-risk products like smokeless tobacco. For
instance, the tax on a pack of cigarettes in Oregon is $1.18, versus $2.14 on a tin of less harmful smokeless tobacco, such as Skoal. Several states, including Arkansas, have this "updside down approach."

While it would be best to see excise taxes go the way of their ugly cousin, prohibition, that is unlikely. State governments are more addicted to cigarettes than most smokers. At least some smokers can quit. States don't give up tobacco taxes.

There is one bright spot. Some states are beginning to recognize that so long as they are going to tax tobacco and nicotine products such as E-cigarettes, they can at least have a tax structure that more accurately reflects the risks of different products.

Last year, Indiana's legislature actually adopted language that requires the state to take into account the benefits of "tobacco harm reduction" when making policy. Now, Oklahoma is considering a move that would go a step further, by taxing "other tobacco products," such
as smokeless tobacco, dissolvable tobacco and even (tobacco derived) E-cigarette vapor at a nickel per unit, compared to the much higher $1.03 on cigarettes. Based on what we know about the risk of E-cigarettes compared to cigarettes, the E-cigarette tax ought to be
even lower, well under a penny, in order to be proportional to the risk. But this initiative is a huge step in the right direction.

The Oklahoma bill's sponsor understands this in a very personal way. Senator Rob Johnson is a former smoker who switched to snus and quit smoking.

Every time a smoker uses the lower risk snus instead of burning and inhaling tobacco from a cigarette, they reduce their tobacco related risks dramatically. But just try telling that to Oklahoma's chapter of the American Lung Association. They are dead set against allowing people like Senator Johnson to reduce their riskt this way. They oppose the bill, writing that it "would effectively have the state of Oklahoma endorse and promote deadly products as 'harm reduction' solutions." What's really deadly though, is when in the name of pubic health, a
group hypocritically distorts risks in pursuit of an unrealistic zero-risk approach.

It is sadly ironic, and rather telling that the American Lung Association would oppose the use of snus as a way to quit cigarette smoking. Snus presents zero risk of lung disease and is an alternative to the number one cause, cigarette smoking. It makes one wonder about the
association's real agenda.

Senator Johnson's bill passed the Senate, and tobacco harm reduction advocates are hopeful that the bill is approved by the house this spring. Other states may consider similar approaches.

As the FDA continues to slowly ponder the complicated challenge of regulating tobacco products, other states can follow the leads of Indiana and, hopefully Oklahoma, by embracing the products of innovation to reduce the risk of smoking related diseases.

Jeff Stier is a senior fellow at the National Center for Public Policy Research.